Memorandum by The Society of Motor Manufacturers
and Traders Limited
1. The Society of Motor Manufacturers and
Traders (SMMT) welcomes the House of Commons Trade and Industry
Committee's inquiry into the economic impact of the End of Live
Vehicles (ELVs) directive.
2. The motor industry is deeply concerned
about the potential impact of the ELVs directive in the UK and
believes that it will require a sharing of responsibility between
economic operators, Government and vehicle owners.
3. The motor industry has taken a very positive
approach to reducing the environmental impact of ELVs during a
long period of time, particularly through the cross industry ACORD
group and the CARE initiative.
4. In implementing the directive it is essential
that the UK Government respects the dates established in the directive
for the introduction of the free take back obligation; 2002 for
new vehicles and 2007 for the existing vehicle parc.
5. The Government should ensure that the
implementation regime introduces a market mechanism to differentiate
between ELVs with a positive and negative value. This will maximise
the use of the existing market and treatment routes for ELVs and
encourage improvements in efficiency and productivity.
6. A retrospective obligation for the entire
vehicle parc will require companies to recognise a significant
liability in their balance sheets and profit and loss accounts.
This could have very serious impacts and the Government must ensure
that the legislation seeks to minimise this potential threat.
7. To minimise the administrative burden
associated with establishing compliance with the reuse, recycling
and recovery targets the Government must introduce reporting obligations
for dismantlers, shredders and waste operators.
8. The SMMT has made a preliminary assessment
of the options outlined in the Government's consultation document
and each of them would impose significant cost, administrative
complexity and uncertainty on all the economic operators involved
in the processing of ELVs.
9. Vehicle manufacturers are currently reviewing
alternative options that seek to maximise the use of the existing
infrastructure, encourage competition and are in line with approaches
being developed in other EU states. There is a particular focus
on the approach being adopted in France.
10. The DVLA needs to introduce a more effective
de-registration system to ensure that the final owner of a vehicle
can be accurately identified and action is taken if they do not
deliver the vehicle to an authorised treatment facility. The issue
of a Certificate of Destruction must ensure that a vehicle cannot
return to the road.
11. The Society of Motor Manufacturers and
Traders Ltd (SMMT) is the leading trade association for the UK
motor industry. It represents some 600 member companies ranging
from vehicle manufacturers, component and material suppliers to
power train providers and design engineers. The motor industry
is an important sector of the UK economy. It generates a manufacturing
turnover approaching £50 billion and supports around 800,000
12. The SMMT welcomes the opportunity of
making a submission to Trade and Industry Committee on the economic
impacts of the end of life vehicles (ELVs) directive. The motor
industry has made substantial progress in improving the environmental
performance of its products and has devoted significant efforts
to reducing the environmental impact of ELVs. The industry is
concerned that implementation of the directive could result in
unnecessary financial and administrative burdens that may reduce
the competitiveness of, and undermine investment in, the UK motor
A FRAMEWORK FOR
13. In implementing the directive it is
essential that the UK Government respects the dates established
in the directive for the introduction of the free take back obligation;
2002 for new vehicles and 2007 for the existing vehicle parc.
Early introduction, as implied in the consultation document, would
impose significant extra costs on manufacturers and treatment
operators. It also represents a more onerous regime than that
being adopted in other major vehicle manufacturing EU states and
could threaten future investment in the UK.
14. Vehicle manufacturers are required to
meet all or a significant part of the costs of providing cost
free take back of ELVs with no or a negative value. There is concern
that without an effective mechanism for distinguishing between
vehicles with a negative value and those that can be processed
at a profit vehicle manufacturers will face significant additional
costs. There will also be little incentive for treatment operators
to improve productivity and reduce costs.
15. The free take back obligation is limited
to ELVs with no or a negative value. The Government should ensure
that the implementation regime introduces a market mechanism to
differentiate between ELVs with a positive and negative value.
This will help ensure that the existing market and treatment routes
for ELVs continues and encourages improvements in efficiency and
16. A key element of the directive is a
requirement on national government to report on progress towards
the reuse, recycling and recovery targets it sets. To minimise
the administrative burden and guarantee consistency it is important
that the Government introduces reporting obligations for dismantlers,
shredders and waste operators.
17. The Government is required to introduce
a Certificate of Destruction, so that the last owner of a vehicle
has verifiable evidence that their vehicle has been safely disposed.
The motor industry is keen that this should be a two step process,
with the final certificate only issued when a vehicle has been
put beyond use. This is necessary to avoid any potential fraud
and enable the tracking of ELVs through the treatment chain.
18. The final owner of a vehicle has an
obligation to ensure that it is disposed of in an appropriate
manner. Currently, as the number of abandoned vehicles demonstrates,
there is little incentive on vehicle owners to ensure that this
happens. Manufacturers are convinced that the DVLA needs to introduce
a more effective de-registration system to ensure that the final
owner of a vehicle can be accurately identified and action taken
if they do not deliver the vehicle to an authorised treatment
19. In January 2002 un-depolluted ELVs will
be classified as hazardous waste. This will mean that all transport
of them will have to be notified to the Environment Agency in
advance. The Agency charges an administration fee of approximately
£15 for every trip. In order to ensure that unnecessary additional
charges are not imposed on treatment operators it is essential
that a used vehicle only becomes defined as an ELV when the de-pollution
20. Vehicle manufacturers have been reviewing
the likely financial impact of the responsibilities the ELVs directive
establishes. The form and wording of the legislation enacting
the directive in the UK will be very important. If the legislation
establishes a retrospective obligation for the entire vehicle
parc, companies will be required to recognise this liability in
their balance sheets and profit and loss accounts. The Government
must ensure that the legislation seeks to minimise this potential
21. Recognising a significant liability
will adversely affect the profit and loss account and the creditworthiness
of the balance sheet. As a consequence loan covenants could be
breached triggering immediate debt repayments and or higher financing
costs. The impact of this and the crystallisation of the liability
could, in extreme circumstances, result in the insolvency of a
business. The collective increase in retrospective liability will
have a negative impact on the prospects for the automotive sector
including the suppliers to the vehicle manufacturers.
22. Currently there are few, if any, treatment
facilities that meet the environmental standards established in
the directive. The Government must introduce an effective policing
and enforcement regime to ensure that authorised treatment facilities
meet these standards. There is huge concern amongst treatment
operators that there will not be adequate enforcement of standards.
This has prevented many from making the investments required to
meet them, because they fear that if they do they will be at a
competitive disadvantage to businesses that flout the rules.
23. The reliability and long life of vehicles
means that some may be presented for recycling where a producer
is no longer in business. The Government is responsible for these
"orphan brands" and must make appropriate arrangements
24. The UK Government has taken steps to
commercialise the market for "grey imports". These are
vehicles originally intended for markets outside the EU and are
imported by independent companies using single vehicle approval
rules. These independent importers must take responsibility for
the vehicles that they introduce into the UK and the Government
must ensure that implementation plans establish an appropriate
mechanism for doing so.
25. The Government must introduce specific
arrangements to deal with new multi-stage build vehicles and vehicles
that are converted after first registration. These vehicles may
contain equipment and materials that the original manufacturer
has no control over. Vehicle manufactures should not be liable
for the consequences of actions by persons modifying vehicles
without their knowledge or consent.
UK GOVERNMENT CONSULTATION
26. In August 2001 the DTI published a consultation
document on implementation of the directive in the UK. It outlined
three possible options; a brand specific contractual scheme; a
tonnage target scheme and a hybrid scheme. The motor industry
was disappointed that none of the major financial issues were
addressed and that many details still remain uncertain.
27. Under the brand specific contractual
scheme producers would be responsible for putting in place collection
systems for their own vehicle-marques, for ensuring that these
vehicles were treated to the tightened standards and for meeting
the recycling targets in respect of those vehicles. Producers
could meet their responsibilities through contracts with treatment
facilities or establish their own facilities. Last owners would
be able to take back their vehicles to facilities that were not
contracted with the producers.
28. This first option is the closest to
a free market approach to ELV implementation. It gives producers
the flexibility to set up both brand specific and collective ELV
networks. It allows producers to contract with their preferred
treatment facilities giving the opportunity for transparent and
auditable payment processes. This would enable the producers to
control the material flows from ELVs and operate cost control
29. This approach would require producers
to make a one off accrual for the historic car parc, with the
attendant risks this would have for the credit worthiness of balance
sheets. For some, but not all manufactures this could trigger
immediate debt repayments or higher financing costs or both. Attempts
are being made in other EU states to minimise the potential impact
of this risk.
30. Under the tonnage target scheme vehicles
could be delivered to any treatment facility that held a permit.
Producers would have to meet all or a significant part of the
cost of take back and treatment for negative value vehicles. In
addition each producer would be required to meet tonnage recycling
targets, which might be set according to each producers' current
market share. Producers could meet these targets by purchasing
either evidence notes (proof that certain tonnages of ELV material
had been recycled) or tradeable permits. The system could also
include a "green factor" to reward producers that used
more recycled material in their vehicles or that made them easier
31. If the tonnage target were based on
current market share then option two would avoid producers having
to make one-off accruals for the historic car parc. This may also
be the case if the likely deficit could not be estimated due to
the fluctuation in the VRN market.
32. The consultation document seems to imply
two sets of costs. The first to cover the costs of take back and
treatment, and the second to secure the information that demonstrates
compliance with the recycling targets. This does not represent
a very attractive scenario for vehicle manufacturers. Producers
do not think it practical to make arrangements with all the countries
authorised treatment facilities.
33. The process for setting the tonnage
targets would be complex and inaccurate. The material content
of every vehicle varies widely based on items such as the engine,
transmission and options. The number of ELVs arising in any year
varies considerably and it could be that the targets would be
higher than the available material.
34. It is essential that competition and
capacity exists in the reprocessing industry to ensure performance
and control costs. Recovery targets for ELVs are due to increase
from 85 per cent to 95 per cent; to achieve them the reprocessing
industry must develop new and more efficient technologies. There
is concern that producers would be faced with significant costs
and no certainty of increased material re-utilisation.
35. The trading of permits, which demonstrate
the reprocessing of materials, would create uncertainty. Producers
and re-processors need financial stability to plan the investments
required to meet the conditions established in the directive.
Significant variations in costs and revenue would undermine this.
36. Notwithstanding the manufacturers reservations
with this option, it would be more acceptable if, as in packaging,
others who derive profit or income from vehicles through their
life had a proportional recovery obligation placed on them.
37. The hybrid scheme differentiates between
the historic car park and vehicles sold from 2002 onwards. For
the historic car park, producers would be set tonnage targets
based on their current market sharesproducers could either
meet these targets by purchasing evidence notes or tradeable permits
(as option 2). For new vehicles, producers would be required to
pay bonds into funds for each vehicle sold, and these funds would
then meet treatment and recycling costs when the new cars began
to be scrapped. Importers would be obliged to pay into the relevant
funds at the same rate as the producer in question. Producers
would be able to set their own bond or levy rate. In other respects
this would work as the first option.
38. The hybrid option retains the main disadvantages
associated with the tonnage target scheme with the additional
concern that it may still require producers to make a one-off
accrual for the historic car parc. In addition the creation of
a bond system will increase administrative complexity and drain
resources from producers well ahead of any recycling requirement
for vehicles sold from 2002.
39. The three options presented in the Government's
consultation document do not meet all the criteria established
by vehicle manufacturers, and each would need to be amended to
achieve universal support. The consultation document indicates
that the Government is prepared to consider amendments and alternatives
to those that it has outlined.
40. In response the SMMT is working with
vehicle manufacturers to develop an approach that may better meet
the implementation criteria that the industry has established.
It is currently examining the legislative proposals that are being
developed in other EU states. These might include the following
41. The last owner is required to deliver
a vehicle intended for destruction (ELV) to an authorised dismantler
or authorised shredder. The dismantler has the option to accept
or reject any ELV presented to them. If the authorised dismantler
accepts the ELV, it must be at no cost to the last holder/owner.
All ELVs accepted by an authorised dismantler are presumed to
have a "positive value". Shredders have an obligation
to accept all ELVs directly from last owners at no cost, but only
if the vehicles are complete.
42. In the event that the shredding industry
demonstrate a deficit in the processing of complete ELVs, producers
are required to organise the free take back of vehicles, in accordance
with the methods that they judge most appropriate. The assessment
of any deficit is to be made by an independent third party jointly
appointed by producers, importers, authorised shredders and government
43. The motor industry has sought to work
closely and constructively with Government on the implementation
of the ELVs directive. It is a complex and wide ranging piece
of legislation that presents a variety of commercial challenges
for all economic operators. The industry is committed to continue
this collaborative approach to ensure that the most effective
solutions are achieved.
1. The European Parliament called on the
European Commission to legislate on ELVs in November 1996. The
Commission took the view that a specific directive was necessary
given the importance of vehicle waste.
2. The directive requires that vehicle,
material and equipment manufacturers must:
endeavour to reduce the use of hazardous
substances when designing vehicles;
design and produce vehicles which
facilitate the dismantling, re-use, recovery and recycling of
increase the use of recycled materials
in vehicle manufacture; and
ensure that components of vehicles
placed on the market after 1 July 2003 do not contain mercury,
hexavalent chromium, cadmium or lead, except in the cases listed
in Annex II of the directive.
3. The directive also introduces provisions
for the collection and treatment of all ELVs. Member States must
set up collection systems for ELVs and for waste used parts. They
must also ensure that all vehicles are transferred to authorised
treatment facilities, and must set up a system of de-registration
upon presentation of a certificate of destruction. Such certificates
are to be issued when the vehicle is transferred, free of charge,
to a treatment facility.
4. The last owner of an ELV, complete with
all essential components, that has no or a negative value will
be able to dispose of it free of charge, with producers meeting
all, or a significant part, of the cost of applying this measure.
5. The storage and treatment of ELVs is
also subject to strict control. Establishments or undertakings
carrying out treatment operations must de-pollute ELVs before
treatment and recover all environmentally hazardous components.
Priority must be given to the re-use and recycling of vehicle
6. At the moment, around 80 per cent of
ELVs by weight are recycled. The aim of the directive is to increase
the rate of re-use and recovery to 85 per cent by 2006, and to
95 per cent by 2015, and to increase the rate of re-use and recycling
over the same period to at least 80 per cent and 85 per cent respectively
by average weight per vehicle and year. Less stringent objectives
may be set for vehicles produced before 1980.
7. Member States must ensure that producers
use material coding standards that allow identification of the
various materials during dismantling. The Commission must establish
European standards on material coding and identification.
8. Economic operators must provide prospective
purchasers of vehicles with information on the recovery and recycling
of vehicle components, the treatment of ELVs and progress with
regard to re-use, recycling and recovery.
9. Member States must report to the Commission
every three years on the implementation of the directive. The
Commission must then publish a report on the implementation of
THE UK DISMANTLING
44. The SMMT has estimated that there are
between 3,000 and 4,000 dismantling businesses currently operating
in the UK. The number of licensed or licensed exempt sites is
closer to 2,000 and on average these sites handle significantly
fewer than 1,000 ELVs per annum. Information gathered by individual
manufacturers indicates that for most of these businesses more
than 50 per cent of their turnover is derived from non-dismantling
activities. For many their most profitable activities are the
sale of parts and used cars.
45. There are 37 shredder sites operating
in the UK and four Heavy Media Plants, two companies' control
80 per cent of this capacity.
46. Industry studies into dismantlers across
the EU have determined that the costs of the dismantling process
are highly volume sensitive. The de-pollution rigs required to
meet the standards outlined in the directive would be under utilised
with a throughput below 2,000 ELVs per year. It is estimated that
it would be necessary to process close to 5,000 ELVs per year
to minimise unit costs.
47. A study of shredders has indicated that
the aluminium content of the material they handle has a significant
impact on their profitability. Scrap aluminium is worth up to
10 times more than scrap steel and ELVs currently make up between
30 and 50 per cent of shredder feed. The shredding industry is
also able to commercially handle ELVs hulks sold on by dismantlers.
48. The shredding and dismantling industries
are currently handling ELVs profitably and there are significant
opportunities to improve the efficiency and productivity of significant
parts of these sectors. In implementing the ELVs directive it
is essential that competition is encouraged and that the free
take back requirement is not allowed to subsidise inefficient
10. The UK Government's consultation document
includes a draft regulatory impact assessment. This estimates
that the total cost to business is in the range of £161 million
to £346 million per annum from 2006 to 2015, and £209
million to £438 million per annum from 2015. These do not
include costs associated with the redesign, heavy metal restrictions,
dismantling manuals, coding of parts and provision of information
11. There continues to be a great deal of
uncertainty about the nature and extent of the costs associated
with the directive. The European Commission conducted a business
impact assessment of the ELVs directive when it was first presented
to the Parliament in 1997. This suggested that the directive would
result in increased employment in the vehicle disposal industry.
It argued that these would be low qualified manual jobs.
12. The Commission recognised that manufacturers
would be involved in developing vehicles that were more easily
recycled, but failed to identify any cost associated with this.
They also did not identify any costs for the provision of cost
free take back.
13. The Consortium for Automotive Recycling
(CARE) undertook a survey of the dismantling industry in 2001
to identify the gap that existed between the current ELVs practice
and the requirements of article 6 and annex 1 of the EU Directive.
The survey found that no sites were complying with these requirements.
There were a number of high volume salvage dismantlers that had
invested in annex 1 requirements and could meet the needs of the
directive but these sites would only be able to deal with around
15 per cent of the ELVs arising due to capacity restrictions and
14. There is great uncertainty in the costings
associated with the implementation of the directive. This is in
part due to the uncertainty surrounding how the directive will
be implemented and responsibilities shared. There is in addition
a reluctance, within some sectors of the treatment industries,
to reveal an accurate picture of the potential costs associated
with the new treatment requirements.
15. The motor industry has been engaged
in addressing the issues raised by ELVs for some considerable
time. In 1991 the Automotive Consortium On Recycling and Disposal
(ACORD) was established to develop and implement a voluntary multi-industry
strategy to improve the existing disposal process. Its objective
was to achieve a reduction in the amount of automotive shredder
residue going to landfill.
16. In 1997 ACORD signed a voluntary inter-sector
agreement on the treatment of ELVs. The agreement contained a
commitment to improve the recovery of material from ELVs to 85
per cent by 2002 and 95 per cent by 2015. It was recognised that
a lot of effort would be needed to ensure that new processes were
implemented to make recovery of non-metallic materials, and in
some instances, the energy value contained in them, considerably
17. Alongside the work being undertaken
by ACORD, motor vehicle manufacturers/importers and vehicle dismantlers
established the Consortium for Automotive Recycling (CARE). It
was initiated by a group of 10 of the leading car manufacturers
who, collectively, account for around 75 per cent of UK car sales.
Their objectives are to research and demonstrate the technical
feasibility of recovery and recycling processes. CARE has a network
of affiliated dismantlers and has undertaken a variety of projects.
18. These have included improving depollution
techniques to increase recovery of oils and fluids; trials to
collect, regrind and recycle polypropylene bumpers and analysis
of shredder residues to determine contamination levels and potential
processing necessary to convert it into a usable fuel.
19. In addition they have undertaken a variety
of work in preparation for the introduction of the ELVs directive.
They have collected data on the nature of the vehicles being processed,
as well as current dismantling and recycling practices. They have
established a draft code of practice for the conditions, processes
and procedures to be adopted by authorised treatment facilities.
As part of this process they have also researched the likely cost
implications of bringing treatment facilities up to the standards
required by the directive.
20. Vehicle manufacturers have dedicated
technical centres engaged in the research and development of new
models. Their work is focused on ensuring vehicles meet future
legislative requirements. As a consequence improved recyclability
and easier dismantling have been key objectives for some time,
but these have also to be balanced by efforts to improve passenger
and pedestrian safety, reduce emissions, improve fuel efficiency
and continually improve quality and reliability.
21. Design for recycling seeks to minimise
the number of parts used and avoid the mixing of plastic parts
in an assembly. Component attachment methods are designed to speed
dismantling with pull out rivets replacing screws, where possible.
22. The majority of ferrous and non-ferrous
material used in vehicles has a high-recycled content. Vehicle
component engineers are increasingly specifying plastic parts
to have a post consumer recycled content. Engine compartment plastic,
heating ducts and air intake grills are typical uses of recycled
plastic. Examples include mud flaps that are made from recycled
polypropylene and the soundproofing using recycled textiles. These
and other applications are an increasing feature of new model
programmes. Manufacturers are developing a variety of recycling/recovery
programmes these include:
treatment technologies for tyres;
pyrolysis of shredder residue recovers
steel and plastic;
pyrolysis of thermoplastics to recover
fibres, oils and wax. Various uses are on trial;
glass is on trial as aggregate in
recovery of seat foams by air extraction
at the shredder, for use as soundproofing; and
the establishment of generic recycled
plastic standards to encourage its use.
23. To aid recycling at end of life manufacturers
have created dismantling manuals for all new cars and older models.
These manuals provide a detailed depollution and dismantling process
that describes the types and quantities by weight of fluids and
materials to be removed and includes information on tools and
methods. This dismantling information is also available in a CD-ROM
package from The International Dismantling Information System
(IDIS). Manufacturers from Europe, Japan, Korea and the US have
created a database for the correct pre-treatment and dismantling
of their past and current models.
24. The dismantling manual describes the
type of plastic used in the construction of a component. In conjunction
with this all plastic parts over 100 gm in the vehicle have a
material type code incorporated in the moulding tool. This mark
is in accordance with international standards for plastic identification.
This helps the recognition and separation process and can allow
for discreet material recovery streams at the dismantler.